Hi Every one,
I really need your opinion.
I have offered a property in Adelaide and the owner accepted my offer. But the Bank valuation (three valuation company) show very similar value, was $25000 lower than property purchased price.
What do you think ? Should I keep buy it ? or pull out ?I am really appreciated for your suggestion.
Regards,
Ben
Hi Ben,
You should do more research on the valuation of the property. Maybe you offered too much. Has the vendor done major capital improvements to the property? Because the valuers have to base their valuation on comparable sales, there may not be anything directly comparable.
Assuming, in your offer to purchase the property you included the clause for independent valuation, you should be able to pull out of the deal. Also, rememner, if the bank valuers are valuing the property $25k below purchase price, thats all they will lend against. This means you have to put lots more in the deal.Try talking to the owner and say, Mr Owner this is what is happening, I believe the property is overpriced, etc, etc, show him/her the Vals. Maybe you still have a chance to knock $25K off the purchase price. I do this a lot of the time when pest and building inspections come through; give it a go!
Happy Investingare you saying that you made an offer that was 25K less than the purchase price and this was the value that the bank gave? The bank's generally value the property at what the purchase price is, regardless of how good a deal you think you have got. I purchased my PPR 40K under the asking price and the bank valued our unit at that reduced price.
If you can provide the valuer with evidence of comparable sales in the area this may result in a higher valuation figure.
what he's saying is that the valuation came in 25k less than the price he offered, which will affect what he can borrow as the bank will lend you either the purchase price or the valuation WHICHEVER IS LOWER. when a valuater looks at the property they base it on comparable sales, as well as cosmetic improvements but it is not uncommon for purchasers to find themselves over valuation in a strong market. As an investor you should be very wary walking into this deal, you make the majority of your capital gains in the first year or two from buying under value. I would offer less or look for another property that is going to fit what you are after better.
Alternatively you can try and finance with another bank, who will send another valuater but you will probably find yourself in the same position.
Remember that banks are talking "if we sell it how much will we get" scenario. Keeping this in mind, will they give you the money? Is it a good deal compared to other similar properties in the area? If so, buy…if not, don't..do your research.
Hi, there
I recently had the same thing happen to me. The creditor's valuation came at $30K lower than what I paid for it (( have already paid a non-redeemable deposti). It's caused me a headache with the creditor as I had to reduce the amount of money I was borrowing to avoid the payment of mortgage insurance.However, I am firmly convinced the valuers were being too conservative (is this a ploy to try and keep the property market prices under control) and I paid very close to what it is actually worth.
I agree that you need to do a comparison with other similar type properties in same suburb. I searched for five months before I found this property and it is in my opinion certainly worth it!
CarolIt certainly is a bit of a vicious circle – On a valuation requested by (and ordered by) a lender, the valuer essentially has to be able to show that the property is worth at least the sell price – this is done primarily based on comparitive sales figures. So……..if someone was to buy a house that supposedly was worth say $400k (it may have even had an 'independant valuation' done prior to confirm this) but the vendor was desperate, and sold it for $350k privately, if the house you were looking at is identical, but perhaps not quite as nice (say 'value' of $375k 'in theory') the valuer would see the other house as only being 'worth' $350k, because that is all it sold for, meaning your new '$375k house' will not be worth that much if comparing with the sold one. It can be a bit dissapointing sometimes, but in a down market, or where some houses have been bought well or sold cheaper, this unfortunately can often be the result. Generally 3 or 4 comoparitive sales are what is used, to 'even things out a bit'. Clear as mud? Cheers.
Hi Ben,
I had even worse thing happen to me! i had a house valued at $67,000 when the house purchase price was $84,000 !!
what i did is compared all the other similar properties and told the bank that they are wrong but they still came back with the same price as in the town i purchased they used the same valuator and had no other!!!
beacuse the property was $84,000 and was returning $120 and $110 rent per week as it was a double maoisonnete it was a grat buy!
looking at it now i was glad i bought them as i did my research. the value now is $165,000 and i'm getting $130 and $120 per week rent!
just remember do your homework! if it's not a good or better deal that the comparative prices in the area then pull out!!!
michael
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